Daimler Sees Second-Half Gains as Europe Bottoms Out

Daimler AG (DAI), the world’s third-largest maker of luxury vehicles, forecast significant gains in
second-half earnings as the western European auto market bottoms
out and new models spur demand.

Backed by vehicles like the new Mercedes-Benz CLA compact
four-door coupe and a new generation of the top-of-the-line S-Class, Daimler expects to grab market share in the second half,
Chief Executive Officer Dieter Zetsche said today. In addition
to improved sales prospects, cost-cutting efforts are proceeding
better than the company had anticipated, he said.

“Profits have already improved and the majority of the
planned savings are expected in the second half of the year,”
said Daniel Schwarz, a Frankfurt-based analyst with Commerzbank.
“This gives increased confidence that the earnings will improve
sequentially in the coming quarters.”

Daimler has countered a drop in European car sales to a
two-decade low by expanding its lineup with new entry-level
vehicles like the A-Class hatchback. The manufacturer also plans
to add more high-end offerings such as the stretched Pullman
version of the S-Class. In all, it plans to roll out 13 new
models that have no predecessor over the next eight years in a
bid to overtake No. 1 Bayerische Motoren Werke AG (BMW) in luxury-car
sales by the end of the decade.

Spending by the Daimler passenger-car unit to roll out new
models contributed to a drop in profitability in the second
quarter. The operating profit margin fell to 6.4 percent from
8.7 percent a year ago.

Daimler shares fell as much as 2.1 percent to 51.57 euros
and were down 0.9 percent at 10:35 a.m. in Frankfurt trading.
The stock has surged 26 percent this year, valuing the company
at 55.7 billion euros ($73.7 billion).

Daimler forecast industrywide demand in western Europe to
show “gradual improvement” in the second half as sales seem to
have “bottomed out,” the company said today in a statement.

The second-half boost won’t totally offset a weak first six
months. Daimler reiterated that full-year earnings before
interest, taxes and one-time items will decline from 2012’s 8.1
billion euros on weaker profit at Mercedes. Ebit from ongoing
business was 3.07 billion euros in the first half, a decline of
31 percent.

‘No Complacency’

Daimler’s second-quarter Ebit more than doubled to 5.24
billion euros, lifted by 3.21 billion euros in proceeds from the
sale of shares in the parent of planemaker Airbus SAS (EAD), the
company said, reiterating figures released July 12. Excluding
one-time items, Ebit fell 8 percent to 2.14 billion euros.

Sales in the period advanced 2.8 percent to 29.7 billion
euros. Net income attributable to shareholders of the company,
which is also the world’s largest maker of heavy-duty trucks,
surged to 2.83 billion euros from 1.48 billion euros a year ago.

Zetsche last year postponed a goal of earning 10 percent
margins from cars to 2014 at the earliest -- four years later
than originally planned. To help reach that target, the
division, which is run by the Daimler CEO, plans to lower
spending by 2 billion euros by the end of next year, under a
savings program dubbed “Fit for Leadership.”

The better second-quarter results “represents progress in
our earnings development, but no cause for complacency,”
Zetsche said today. “We will continue to work hard on achieving
our goals.”